Prince Plans to Wean Saudi from Oil by 2020

Submitted by clorio on Wed, 04/27/2016 - 10:28am

Author:

http://securingamericasfutureenergy.cmail20.com

News Story Date:

2016-04-27 00:00:00

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Saudi Arabia is ready for a world without oil. At least that’s the goal of Deputy Crown Prince Mohammed bin Salman, the 31-year-old son of King Salman bin Abdulaziz.On Monday, the government of the de facto OPEC leader agreed tosweeping economic reforms, spearheaded by the prince, to wean the oil exporter off crude revenues by 2020, which currently account forclose to 80 percentof the country’s income, andtransform the Kingdominto a diversified global investment power.

Since oil’s downturn in late 2014, low prices have strained the Saudi economy and that of theMiddle East at large, leading the Kingdom to cut spending, tap foreign-exchange reserves, and securebillions in loans. During oil’s boom prior to 2014, Saudi’s spendthrift mentality may have been best described by another prince as, “Let’s go crazy.” From 2010 to 2014, Saudi Arabia lost between80 to 100 billion dollars a year, a quarter of the entire Saudi budget, on inefficient spending that nearly tipped the country into economic collapse.

“Vision 2030,” as the Deputy Crown Prince calls his plan, aims to ensure Saudi Arabia doesn’t find itself in such dire straits again through a combination of economic and social policies that will include diversifying the economy,increasing foreign investments, tax increases, a larger role for the private sector, and asset sales, most notably a share of the Kingdom’scrown jewel, Saudi Aramco, estimated to be worth more than $2 trillion.

Known as “Mr. Everything” by diplomats since assuming his position of power with unprecedented control over state oil operations, the national investment fund, economic policy, and the Ministry of Defense, Prince Mohammed has shaken up Saudi Arabia’s traditional modus operandi, most recentlysuperseding oil Minister al-Naimiand scuttling the April 17 Doha talks. His progressive vision towards economic reform without oil is akin to his stance onsocial policiesand opening the historically insularcountry’s doorsto tourists and foreign workers.

Prince Mohammed’s leadership acumen has not been lost onPresident Obama, who found him “extremely knowledgeable, very smart, and wise beyond his years.” After meeting in Riyadh with a congressional delegation, RepublicanSenator Lindsey Grahamcalled the prince, “a guy who sees the finite nature of the revenue stream and, rather than panicking, sees a strategic opportunity.” Adding, “His view of Saudi society is that basically it’s now time to have less for the few and more for the many. The top members of the royal family have been identified by their privilege. He wants them to be identified by their obligations instead.”

In arecent Bloomberg interview, commenting on his vision for Saudi Arabia, Prince Mohammed pointed out that, “We [the younger generation] think in a very different way. Our dreams are different.”

Details of the plan are expectedwithin six weeks, but the announcement already represents a stark departure from Saudi Arabia’s longstanding reclusive style. While it has been met withpraise, it’s yet to be determined if the plan willpan out, or what it will mean for U.S.-Saudi relations and U.S. energy security.